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Petrochemical prices to decline in short term

Anindita Dey  |  Mumbai 

Fall due to imports from West Asia and sluggish demand.

The are expected to decline 5-10 per cent over the next three to four months in the domestic market.

Sources associated with procurement of petrochemicals from refineries say imports from West Asia will depress prices, while for solvent chemicals such as benzene, sluggish domestic demand will be the prime reason.

“Overall, the rainy season is not good for polymers but on the whole, petrochemicals are not driven by seasonal factors,” said an official source with a petrochemical company. Sources added that although the demand for polymers might go up in the festive season starting September, the commodity might not witness the highs seen last year, when polymer prices rose to Rs 75,000-80,000 a tonne.

The major companies in the Indian market are Haldia Petrochemicals, GAIL, Indian Oil Corporation and has recently commissioned a petrochemical unit in Panipat, with the second-largest capacity in India. Official sources said domestic polymer supply is high, as are imports. This has led to some domestic plants being temporarily shut.

While polymers like ethylene, propylene and butadiene are used for plastic products, solvents are the raw materials for industrial dyes. Synthetic detergents and fibre intermediates are used for synthetic fibres like polyesters.

End users of products using these petro inputs, primarily plastics, are of the view that if the price decline is more than five to seven per cent, there will be a case for revising the prices of end products.

The domestic synthetic detergent market is saturated and imports are cheap. “This is because most facilities in West Asia which are exporting to India are gas-based and so delinked from crude oil prices,” added an official. In butadiene, though there are no imports, since India has surplus capacity which is exported, the demand has been rather subdued from the synthetic rubber industry, the end user.

Said an official with a petrochemical plant: “From now on, the pricing for polymers will be critical, since the market is slightly oversupplied, both due to upcoming capacities in the domestic market and dumping of imported polymers as overseas units are facing a squeeze in demand due to a slowdown.”

The long-term projection for polymers is rosy, since the annual growth in usage in India is 11-12 per cent, as against four-five per cent abroad.

In the short term, sources added, the polymer market might witness new product variants by reworking product grades, more tactical pricing, efficient delivery mechanisms and new services.

Most petro products, mostly polymers and solvents, are derived from Middle East refineries where the feedstock is gas, which is very cheap and delinked from volatile crude prices, the sources said.

First Published: Fri, July 16 2010. 00:32 IST